11.

Stock-Based Compensation Plan

The 2017 Plan – On December 21, 2017, the Company’s stockholders approved the Bio-Path Holdings, Inc. 2017 Stock Incentive Plan (the “2017 Plan”), which replaced the First Amended 2007 Stock Incentive Plan, as amended (the “2007 Plan”). The 2007 Plan expired by its terms in January 2018, however, no awards were made under the 2007 Plan upon approval of the 2017 Plan. The 2017 Plan provides for the grant of Incentive Stock Options, Non-Qualified Stock Options, Restricted Shares, Restricted Share Units, Stock Appreciation Rights, Performance-Based Awards and other stock-based awards, or any combination of the foregoing to the Company’s employees, non-employee directors and consultants. As of December 31, 2017, the total number of shares reserved and available for grant and issuance pursuant to the 2017 Plan is 1,200,000 shares, subject to the terms of the 2017 Plan. Under the 2017 Plan, the exercise price of awards is determined by the Board of Directors or the compensation committee of the Board of Directors, and for options intended to qualify as qualified Incentive Stock Options, may not be less than the fair market value as determined by the closing stock price at the date of the grant. Each option and award under the 2017 Plan shall vest and expire as determined by the Board of Directors or the compensation committee. Options expire no later than ten years from the date of grant. All grants provide for accelerated vesting if there is a change of control, as defined in the 2017 Plan.

Stock option awards granted for the years 2017 and 2016 were estimated to have a weighted average fair value per share of $6.00 and $20.90, respectively. The fair value calculation is based on stock options granted during the year using the Black-Scholes option-pricing model on the date of grant. In addition, for all stock options granted, exercise price was determined based on the fair market value as determined by the closing stock price at the date of the grant. For stock options granted during 2017 and 2016 the following weighted average assumptions were used in determining fair value:

	2017		2016
Risk-free interest rate		2.06%		1.37%
Expected volatility		99%		109%
Expected term in years		6.1		6.1
Dividend yield		-%		-%

The Company determines the expected term of its stock option awards using the simplified method based on the weighted average of the length of the vesting period and the term of the exercise period. Expected volatility is determined by the volatility of the Company’s historical stock price over the expected term of the grant. The risk-free interest rate for the expected term of each option granted is based on the U.S. Treasury yield curve in effect at the time of grant.

Option activity under the 2007 Plan for the year ended December 31, 2017, was as follows (in thousands, except as noted):

						Weighted
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
				(per share)		(in years)
Year Ended December 31, 2017
Outstanding at December 31, 2016		707		$	13.30		5.2	$	2,241
Granted		68			7.50		9.3
Forfeited		(87	)		16.50
Expired		(46	)		21.30
Outstanding at December 31, 2017		642		$	11.60		4.0	$	-
Vested and expected to vest December 31, 2017		627		$	11.50		3.8	$	-
Exercisable at December 31, 2017		562		$	10.70		3.3	$	-

The aggregate intrinsic value represents the total pretax intrinsic value (the difference between the Company’s closing stock price on December 31, 2017 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2017. This amount changes based on the fair market value of the Company’s stock.

Option activity under the 2007 Plan for the year ended December 31, 2016, was as follows (in thousands, except as noted):

					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
			(per share)		(in years)
Year Ended December 31, 2016
Outstanding at December 31, 2015		575	$	10.50		5.3	$	1,972
Granted		132		25.40		9.3
Exercised		-		-
Forfeited		-		-
Outstanding at December 31, 2016		707	$	13.30		5.2	$	2,241
Vested and expected to vest December 31, 2016		673	$	12.70		5.0	$	2,239
Exercisable at December 31, 2016		544	$	10.10		4.1	$	2,236

The aggregate intrinsic value represents the total pretax intrinsic value (the difference between the Company’s closing stock price on December 31, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2016. This amount changes based on the fair market value of the Company’s stock.

Stock-Based Compensation Expense – Total stock-based compensation expense for the year ended 2017 was $0.8 million which consisted of research and development expense of $0.3 million and general and administrative expense of $0.5 million. As of December 31, 2017, future stock-based compensation expense for all outstanding unvested options was $0.9 million, which is expected to be recognized over a weighted-average vesting period of 2.3 years. Total stock-based compensation expense for the year ended 2016 was $0.8 million which consisted of research and development expense of $0.4 million and general and administrative expense of $0.4 million.